Revenue Sharing Mechanism for Risk-Averse Airline Alliances

Li Shi-ping; Cui Yi

doi:10.3969/j.issn.1007-7375.2014.04.009

Abstract：An airline alliance network consisting of two risk-averse airlines is addressed in this paper .A decision-making model for such a network is proposed .By using the mean-standard deviation risk measure criteria, a decision-making objective function for the airline alliance members is also established .First, an equilibrium model in the network is analyzed under the centralized decision-making .It is found that the risk aversion characteristics of airlines reduce ticket prices of airlines , thereby reducing the overall effec-tiveness of the airline alliances .Second, under the revenue sharing mechanism , a decentralized decision-making model in the airline alliance network is investigated .Result shows that revenue sharing mechanism can maximize not only the effectiveness of the individual alliance members , but also maximize the overall effectiveness of airline alliances .The revenue sharing mechanism can improve the performance of airline alliance members , which is closely related to the price elasticity coefficient , the ratio of operating costs in the domestic and international routes , the airline ’ s risk aversion and the revenue sharing coefficient .In addition , numerical results determine that the effects of different parameters on the performance levels of the airline alliance members are different under the revenue sharing mechanisms .